December 7th, 2014
by Poly, Zentrader
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Since my last gold update, one week ago, gold has added just $10 during a period of the Cycle where the majority of the gains should have occurred. On the surface, yet again, more of the indecisive type of action that has in the past inspired short sellers to become more aggressive.
As they have done during past lightly traded holiday periods, the shorts came out firing into the thinly traded market with the goal of running the stops on gold. Obviously, they succeeded in doing so with Silver, at one point during the assault sinking it by over 10%, another classic after-hours raid of a market devoid of "active traders".
But a very curious development occurred this time, one that I feel has been given far too little attention to date. Not only did gold repel the battering, but it staged a rather impressive reversal. The real tell though was in the silver pits, where 6 year lows were reversed to produce one of the biggest daily price movement in decades. This is significant, because the raid occurred during a very vulnerable time in the Cycle. The type of weakness and vulnerability we've seen these past 3 years would have been no match for this type of raid. A continuation of the bear market would have immediately ensued, leading me to believe that the character of this market has changed.
On the flip side, the gold sector isn't exactly flying either, so I must categorize the overall evidence here as being slightly conflicting. The natural tendency is for this market to continue to be sold, that's the primary trend. So seeing less than stellar buying here I attribute more towards nervousness rather than outright weakness. With past new Investor Cycles, we would experience these sharp, counter trend and short covering moves. But not so this time around, possibly suggesting that this action is bottoming behavior rather than counter-trading.
So overall, I still consider the developments here as constructive, mainly because we have a Day 15 Cycle high now. That is almost always going to mark a Right Translated Cycle, which confirms my count where this is a 1st Daily Cycle.
We're getting close to a Cycle top now; I believe many people are expecting one. But I also know that 1st Daily Cycle's average 29 days in length and the top comes on Day 19. We're cutting it close, but I would like to see one last 3 to 5 day push higher first to force some of the short speculators to capitulate. On the downside, just watch the trend-line and the 10dma (currently $1,195). A close below that moving average, this late in the Cycle, will certainly signal a DCL is coming.